To find an investor for a hospitality business, you first have to decide what the business needs besides capital. A financial partner brings money and management discipline with an exit horizon in mind; a trade partner brings money together with sector capabilities, such as purchasing, openings or a presence in other markets. The right choice depends on your growth plan and on the role you want to keep in the company.
What you need the partner for
Before looking for an investor, it helps to write down on one page what the money is for. The most common reasons are financing new openings, buying another business, entering a new market or allowing one of the current partners to exit. Each objective calls for a different investor profile.
It also helps to decide how much you are prepared to give up. Bringing in a partner can be done with a minority stake, which keeps you at the helm, or a majority stake, which looks more like a partial sale. In both cases, decisions you used to take alone will now be shared, and it is best to accept that from the start.
The financial partner: capital and discipline with an exit horizon
A financial partner is an investor whose main business is investing: private equity funds, family offices or private individuals with experience in unlisted companies. They bring capital and, often, management discipline: budgets, regular reporting, corporate governance and a more formal relationship with the banks.
They usually come in intending to exit at some point, by selling their stake to another investor or alongside the other partners. That exit horizon shapes the business plan and should be discussed openly before signing. In return, a financial partner tends to leave the daily operation in the hands of the team that is already running it.
It is a good fit when the concept is proven, the management team is solid and what is missing for growth is mainly capital and structure.
The trade partner: capital with sector capabilities
A trade partner is a company from the sector itself or a neighbouring one: a restaurant group, a hotel operator, a distributor or a food and drink manufacturer. Besides capital, they can bring purchasing power, know-how in openings, access to locations, logistics or a network in other countries.
The trade-off is that their interest is usually strategic and long-term, and they will want to integrate part of their business with yours. That can accelerate growth and also limit your independence. In international expansion, a common variant is the joint venture with a local operator who brings capital and knowledge of the target market.
It is a good fit when the business needs capabilities it does not have today and that an operator in the sector already masters.
How to decide between a financial and a trade partner
The useful question is what your business lacks to take the next step. If it is mainly capital and management structure, a financial partner is usually the better fit. If it is operational capabilities, access to a market or purchasing volume, a trade partner brings more.
It is also worth going through these points with each candidate:
- Fit with your plan. Whether the partner shares the pace of growth and the destination you have in mind for the business.
- The founder’s role. Which decisions you will keep taking and which will require agreement.
- Exit. When and how the partner will be able to exit, and what happens to their stake.
- Conflicts of interest. Whether a trade partner owns brands that compete with yours.
- Personal chemistry. You will be sharing decisions with that person or that team for years.
What an investor looks at before joining your business
Financial or trade, the investor is looking for companies and brands with a proven business model, well-organised financial information and the capacity to scale. To value the company they will look beyond EBITDA: brand strength, site quality, cost structure, management team and the ability to replicate the model.
If any of those points is weak, it is worth working on it before presenting the business. A concept that depends entirely on the founder, or accounts that cannot be read site by site, make the transaction less attractive and worsen the terms the investor is prepared to offer.
Steps to finding a partner without losing control of the process
- Define the objective. What the capital is for, what percentage you are prepared to give up and what role you want to keep.
- Organise the information. Accounts by site, leases, ownership of the brands and the growth plan.
- Value the company. Know what it is worth before you hear the first offer, so you can negotiate with arguments.
- Prepare the investor documentation. A clear document presenting the business model, the team, the figures and the use of the capital.
- Choose who to call. A few qualified counterparties are better than an open round that exposes your business.
- Protect confidentiality. Share detailed information only after a confidentiality agreement.
- Negotiate the shareholders’ agreement with advisers. That is where governance, majorities, exit and dispute resolution are set.
Talk before you search
Finding the right partner takes time, and the counterparty you choose will shape the future of the business. Our page for companies explains how we handle bringing financial or trade partners into hospitality companies, with a network of investors and strategic partners in Europe, Latin America and the Middle East. If you would like a second opinion on your case, a Link Capital partner will review it in the strictest confidence and contact you within two working days.